Royce Poinsett 2017-08-23 19:57:12
OVERVIEW The 85th Texas Legislature will be remembered as the point when Republican leaders clashed publicly like no time in recent memory, fisticuffs broke out on the House floor, and major legislation was intentionally scuttled—culminating in the governor calling a July special legislative session to complete unfinished business. Republican tension has been building over the past few sessions. On one side are “moderate Republicans,” those who are fiscally and socially conservative but also focused on mainstream pro-business priorities. On the other side are “movement Republicans,” a growing populist faction often more motivated by small-government orthodoxy and social conservatism. Lt. Gov. Dan Patrick served as legislative leader of the movement Republicans, unveiling an ambitious list of 30 conservative agenda items. And a Senate dominated by like-minded legislators promptly passed and sent such bills on to the House. Perhaps no issue could so illustrate the GOP divide, and define the session itself, as Patrick’s proposal to enact North Carolina-style “bathroom legislation” to require individuals to use bathroom facilities designated for their “biological sex.” Movement Republicans supported the proposal whole-heartedly as a public safety measure. Democrats and moderate Republicans (and many in the business community) derided the proposal as frivolous, discriminatory, and an invitation to business boycotts that could hurt the state’s economy. House Speaker Joe Straus led the latter camp. He and the House focused on their own agenda, deliberately slow-playing consideration of the Senate’s most controversial proposals. Those bills languished in the House committee process, emerging—if at all—significantly narrowed. In the final tense week of the regular session, each chamber took the other’s priority bills hostage, seeking to gain leverage and force surrender. Gov. Greg Abbott, long popular with both camps of the Republican Party, pushed Patrick and Straus hard in the closing days to negotiate compromises on a number of major measures. Instead, Patrick and Straus dug in, holding dueling press conferences and openly blaming each other for the various stalemates. Once it became clear that several of Patrick’s priorities would die in the House—most importantly the Senate’s versions of bathroom legislation and local property tax reform—the lieutenant governor scuttled a few “must-pass” bills, including one reauthorizing the state agency that licenses and regulates Texas doctors. Patrick’s stated goal was to force the governor to call a special session, which he hoped would include continued work on the Senate’s agenda items. And the Capitol community halfheartedly celebrated the regular session’s end, knowing the summer break would be woefully brief. Major Legislation of the Regular Session Texas legislators filed more than 6,600 bills in 2017, and enacted over 1,200 into law—a reduction from prior sessions. Numerous significant bills were killed in major areas such as water, transportation, and school finance. Some of the most significant legislative action is summarized here. State Budget. SB 1, the state budget, was one significant exception to the gridlock. Budget writers for the two chambers began negotiations billions of dollars apart in terms of both spending priorities and methods of finance but in the end surprised many by finding compromise. SB 1 enacts a two-year balanced budget with $217 billion in overall spending, an increase of less than 1 percent over the prior budget. Perhaps most surprising, the Senate relented to finally dipping into the state’s $10 billion Economic Stabilization Fund (also known as the “Rainy Day Fund”), agreeing to utilize $1 billion of the stockpile to help fund certain expenditures. Immigration. Republicans succeeded in enacting a socalled “sanctuary cities ban.” SB 4 imposes criminal penalties on local law enforcement officials who refuse to honor federal detention requests for noncitizen inmates subject to deportation and bans local policies that prevent local officers from inquiring about the immigration status of people they have lawfully detained. This legislation was bitterly debated, leading to a scuffle between Republicans and Democrats on the House floor. Several Texas cities have already filed suit to stop the law. SB 1 continues the existing surge of Department of Public Safety troopers and equipment along the border with an additional $800 million appropriation. State vs. Local Control. HB 100 preempts cities from regulating ride-hailing companies like Uber and Lyft, and instead enacts a statewide regulatory framework. HB 1449 prohibits cities from pursuing housing affordability objectives through “linkage fees” on new development. On the other hand, cities were successful in defeating legislation that would have removed their ability to enact local plastic bag bans, tree protection ordinances, or regulations on short-term rental companies like Airbnb. Child Welfare Reform. Legislators responded to federal court rulings and headlines detailing foster child deaths, slow response times, and unplaced children housed in state offices. SB 1 appropriates $500 million in new money for Child Protective Services, targeted toward raises for caseworkers and 600 new caseworker hires. A package of bills (SB 11, HB 4, HB 5, and HB 7) enacts a major overhaul of the organization and policies of the system. Abortion. SB 8 bans certain second-trimester abortion procedures, restricts fetal tissue and cord blood donations, and requires health care facilities to bury or cremate fetal remains. Opponents plan to challenge the new law in court. Texting. HB 62 enacts a statewide ban on texting while driving and creates a new Class A misdemeanor offense for violators who kill or injure others. The Special Session Abbott announced a 30-day special session slated for July 18. Look for coverage in the October issue of the Texas Bar Journal . New Laws That Affect the Real World As always, the broad work of the Legislature’s regular session extended into countless nooks and crannies of “everyday life.” Guns. SB 16 lowers the Texas concealed handgun fee to $40, one of the lowest in the nation. In 2011, legislation was passed that allowed Texas hunters to shoot feral hogs from helicopters; HB 3535 allows them to shoot the species from hot air balloons as well. Schoolyard. SB 179 criminalizes cyberbullying of minors, provides schools with new tools to combat it, and allows victims to seek injunctive relief. SB 7 heightens criminal penalties for teachers who have inappropriate physical relationships with students and for school administrators who fail to report them to parents or authorities. Looking Forward Once the Legislature finally concludes its 2017 sessions, however many there might be, Capitol observers will begin looking toward the 2018 elections and the 2019 session. A major question will be whether movement Republicans continue to gain power and boldness, or whether moderate Republicans and the business community can reorganize to regain seats and momentum. Texas Democrats are watching the Republican infighting and hoping for a healthy midterm election bump to deliver them more seats in the Texas House. Democrats also hope to field serious candidates for at least some of the statewide offices that will be on the Texas ballot—none of which a Texas Democrat has won since 1994. ACCESS TO JUSTICE By Bruce P. Bower This article focuses on developments in the 85th Texas Legislature affecting access to justice, specifically legislation during the regular session including SB 1, SB 1911, and HB 1020. The state budget for fiscal years 2018-2019 adopted by the Legislature provides $44,583,854 for basic civil legal services for 2018 and $34,983,854 for 2019.1 For fiscal year 2018, the Legislature also directed that $9.6 million must be used for basic civil legal services to victims of sexual assault.2 Receipts from the pro hac vice fee and filing fees also contribute to the amounts available for basic civil legal services.3 The budget specifies that $1.5 million in general revenue each year is for basic civil legal services to veterans and their families.4 The amounts for fiscal years 2018-2019 include funds from the settlement with Volkswagen for emissions violations. The Texas Supreme Court received $42.5 million in one-time civil penalties as a result of that settlement.5 The Volkswagen settlement funds are available to legal aid thanks to the Chief Justice Jack Pope Act, or Texas Government Code §402.007(b). This section provides for crediting to the Judicial Fund up to $50 million per biennium of recoveries by the state for violations of the Business & Commerce Code. These recoveries in the Judicial Fund are administered pursuant to order of the Texas Supreme Court. Recognizing the one-time nature of the Volkswagen settlement funding, the 85th Texas Legislature provided: “It is the intent of the Legislature that during the years subsequent to this biennium, to the extent allowed by law, funding for Basic Civil Legal Services should be continued beyond use of one-time civil penalties provided through Judicial Fund No. 573 funding from a settlement such as that between the State of Texas and Volkswagen.”6 The Supreme Court includes funding for legal aid in its budget request to the Legislature. The Supreme Court is acknowledged nationally for its leadership in supporting access to justice. The appropriations to the Supreme Court for basic civil legal services are administered by the Texas Access to Justice Foundation, pursuant to orders of the court. SB 1911, effective September 1, 2017, amends the Texas Government Code by adding Section 51.808 and amends Local Government Code 323.023(b). Section §51.808(a)(1) of the Texas Government Code will require the clerk of each court in Texas to post notice of self-help resources for pro se litigants. If the particular court has a website, the notice posted must contain a link to “the self-help resources Internet website designated by the Office of Court Administration of the Texas Judicial System, in consultation with the Texas Access to Justice Commission.” The linked website will have information on lawyer referral services certified under Chapter 952 of the Occupations Code; the name, location, and website of any local legal aid offices; and any court-affiliated self-help centers serving the county in which the court is located. The court’s website must also include a link to the Texas State Law Library’s website. Section 51.808(a)(2) will require the clerk of each court in Texas to conspicuously display in the clerk’s office in a location frequently accessed by the public a sign with the information required by §51.808(a)(1). The Office of Court Administration is required to prescribe the format for the information required. SB 1911’s amendment to Local Government Code §323.023(b) adds a fourth permissible use for the county law library fund: “establishing and maintaining a self-help center to provide resources to county residents representing themselves in legal matters.” Some counties in Texas already have self-help centers, established with other funds. HB 1020, effective September 1, 2017, amends Texas Government Code §81.053(a) and modifies the prohibition against an inactive member of the State Bar from practicing law in Texas. The amendment will allow inactive members of the bar to provide volunteer legal services as provided by a rule promulgated by the Texas Supreme Court. The Texas Access to Justice Foundation has additional information about state funding for legal aid, which can be found at tajf.org. Information for pro se litigants can be found at TexasLawHelp.org. The appropriations and enactments mentioned in this summary were made possible thanks to the support of the governor, lieutenant governor, the speaker of the House of Representatives, the attorney general, and the members of the 85th Texas Legislature. The Texas Access to Justice Commission, led by attorneys Harry Reasoner and Trish McAllister, and the Texas Access to Justice Foundation, led by attorneys Richard Tate and Betty Balli Torres, also contributed mightily. The provisions discussed are all a testament to the leadership of the Texas Supreme Court. Chief Justice Nathan L. Hecht has stated, “Justice for only those who can afford it is neither justice for all nor justice at all.” Hecht always gives credit to the entire Supreme Court and to his predecessors, Hon. Wallace B. Jefferson and Hon. Thomas Phillips, for the enduring support of basic civil legal services in Texas. Lastly, one would be remiss to not mention the role of attorney Randall D. Chapman who has been a tireless advocate behind the scenes on behalf of funding for basic civil legal services. Notes 1.) See Page 531 of the State Budget at http://www.lbb.state.tx.us/Documents/Appropriations _Bills/85/Conference_Bills/SB1_Conference_Bill.pdf. (“Supreme Court of Texas”). 2.) SB 1, Rider 9. State Budget, Page 533. 3.) Ibid. 4.) SB 1, Rider 10. State Budget, Page 533. 5.) See Page 3 at http://www.legis.state.tx.us/tlodocs/85R/handouts/C0132017022307301/e0f14b4c-90c2-4f46-bf57-d5a5c06b4a58.PDF. 6.) SB 1, Rider 11. State Budget, Page 533. BUSINESS LAW By Daryl B. Robertson This article summarizes several bills passed by the Texas Legislature in its 2017 regular session that affect business law and does not purport to describe all passed bills in this area. This article contains summaries only and should not be relied on as a complete description of any bill. All bills are effective on September 1, 2017, unless otherwise indicated. Corporations and Nonprofit Associations Bill SB 1518 amends various provisions of the Texas Business Organizations Code relating to corporations and nonprofit associations. Summaries of the more significant amendments follow. Merger or Conversion of Nonprofit Association. Domestic nonprofit associations are the only type of domestic entity that is not currently authorized under the code to engage in a merger or conversion. The bill authorizes a domestic nonprofit association to effect a merger or conversion subject to the same restrictions as currently apply to a merger or conversion of domestic nonprofit corporations. Voting of Jointly Held Ownership Interest. The bill adds rules for voting of jointly held ownership interests, which are those held of record in the names of two or more persons or those for which two or more persons have the right to vote the interests. Class Voting of Shares for Merger or Conversion. The bill clarifies that separate voting by a class or series of shares of a domestic for-profit corporation is required for approval of a plan of merger or conversion if that class or series of shares is to be converted into or exchanged for other securities, interests, obligations, rights to acquire, cash, property, or any combination as a result of the merger or conversion. Share Issuance Flexibility. The bill adds more flexibility for a board of directors of a domestic for-profit corporation to authorize the issuance of shares. The board’s authorization must state the maximum number of shares to be issued, the period during which the shares may be issued, and the minimum amount of consideration for which the shares may be issued but can delegate certain actions or determinations to any person or persons, including the corporation. These amendments are similar in concept to recent changes made to the Delaware General Corporation Law, or DGCL. Dividend Flexibility. The legislation also adds more flexibility for a board of directors of a domestic for-profit corporation to authorize distributions to shareholders. The board’s authorization must establish the maximum amount to be distributed and the period during which that maximum amount may be distributed, including by setting a formula to determine the amount to be distributed. The authorization can delegate certain determinations or actions to any person or persons, including the corporation. Ratification of Defective Corporate Acts or Share Issuances. The bill amends the code’s provisions relating to ratification of defective corporate acts or share issuances by for-profit corporations. These amendments are modeled on recent amendments to similar DGCL provisions. Among many other changes, multiple defective corporate acts can be ratified at the same time, and shareholders can approve the ratification itself rather than the specific resolutions adopted by the board of directors. Substantial clarifications have also been made with respect to the contents of—and requirements for filing—a certificate of validation. Partnerships and Limited Liability Companies Bill SB 1517 amends various provisions of the Texas Business Organizations Code relating to partnerships and limited liability companies. Significant amendment summaries follow. Service of Process on Limited Liability Companies. The bill provides for the means of service of process on a series of a domestic limited liability company or foreign entity. Because there are no requirements for a series to file with the secretary of state an appointment of a registered office or agent, the amendments place the responsibility on the domestic LLC or foreign entity the series is a part of to inform the series of the service of process. Any service of process must include the name of the domestic LLC or foreign entity and the name of the series. Upon receipt, the registered agent or secretary of state is required to forward the process to the domestic LLC or foreign entity but is not required to forward the process directly to the series. Cross-Collateralization of Debts of Series. Amendments specify that written cross-collateralization agreements among various series of the same limited liability company and the LLC generally are deemed to be enforceable notwithstanding the liability protections provided to a series in the statute. These changes are similar to recent amendments to the Delaware Limited Liability Company Act. Series of LLC as a Person. Although a series is not a separate domestic entity for purposes of the code, the bill clarifies that a series of a domestic LLC or foreign entity should be considered a “person” for purposes of the code. Member’s or Partner’s Rights to Inspection Costs. New provisions specify that a member of a domestic LLC or a partner in a domestic limited partnership may recover from the company or partnership the cost or expense of the member or partner, including attorneys’ fees, incurred in enforcing the rights to examine entity records requested in writing. Defenses to an action brought for expense recovery are also specified. Involuntary Winding Up of LLCs. The grounds on which a court can order winding up of an LLC have been conformed to the grounds for a court-ordered winding up of a partnership. Enforceability of Partnership Agreement and Company Agreement. The bill clarifies that a company agreement of a domestic LLC or a partnership agreement of a domestic partnership is enforceable by and against the entity regardless of whether the entity itself has signed or otherwise expressly adopted the agreement. Notice to Non-Consenting Partners of Action by Written Consent. The bill rescinds Section 154.103 of the Texas Business Organizations Code, which required that notice of any action by consent of fewer than all of the partners in a domestic partnership must be given to a partner who has not given written consent to the action. Entity Names Standard HB 2856 amends the code to adopt the more modern “distinguishable in the records” standard for entity names, which is the standard used in most other states. The amendments should facilitate the formation of new business entities and the registration of out-of-state business entities to transact business in Texas. After the amendments, the new name of a domestic filing entity or the name under which a foreign filing entity registers to transact business in Texas must be distinguishable in the records of the secretary of state from (a) the name of an existing filing entity or registered foreign filing entity, (b) a reserved or registered name, or (c) a fictitious name under which a foreign filing entity has registered to transact business in Texas when its name is not available. An indistinguishable name will nevertheless be permitted when the entity having the conflicting name provides a notarized written consent for use of the name, if the secretary of state does not determine that the names are the same. A delayed effective date of June 1, 2018, provides time for the secretary of state to make modifications to current systems, modify forms, and amend administrative rules. Public Benefit Corporations HB 3488 amends the Texas Business Organizations Code to authorize for-profit corporations to become public benefit corporations. A majority of other states authorize the formation of those kinds of corporations. Such a corporation must have as one of its purposes to produce one or more public benefits to be promoted by the corporation. A public benefit corporation must be managed in a manner that balances the shareholders’ pecuniary interests, the best interests of those persons materially affected by the corporation’s conduct, and the specified public benefits. Other Bills of Significance SB 679 amends the code to authorize chiropractors to jointly own professional LLCs and associations, partnerships, and nonprofit corporations with doctors of medicine, osteopathy, and podiatry. HB 1217 authorizes online notary publics to perform notarial acts performed by means of two-way video and audio conference technology, effective July 1, 2018. SB 1193 amends the Estates Code to adopt the Texas Revised Uniform Fiduciary Access to Digital Assets Act. HB 3921 amends the Finance Code to add provisions for the protection of vulnerable adults from financial exploitation. SB 944 adopts the Uniform Foreign-Country Money Judgments Recognition Act, effective June 1, 2017. HB 1974 amends the Estates Code to make substantial revisions relating to durable powers of attorney, including adding provisions to require persons who are presented with a durable power of attorney to accept it subject to satisfaction of certain conditions. HB 1995 amends the Texas Uniform Trade Secrets Act to, among other things, clarify the key definition of “trade secret” and to add definitions of “willful and malicious misappropriation” and “clear and convincing evidence,” which are standards that must be met for awards of exemplary damages. CONSTRUCTION LAW By Ben L. Aderholt The State Bar of Texas’ 2017 Legislative Program included a proposal from the Construction Law Section. SB 807, supported by the section, passed along with seven other bills relevant to the practice of construction law. The last day of the 85th Legislature was May 29, but the governor called a 30-day special session beginning July 18. Choice of Law and Venue Texas’ Business and Commerce Code provides protection for general contractors and subcontractors who contract with entities from other states. SB 807, amending Section 272, gives the contractor or subcontractor the ability to void a clause requiring that disputes be decided under the law of another state or for the dispute to be heard in another state, if the project is located in Texas. Thus, projects constructed in Texas will be decided in Texas, under the state’s law. However, the new statute only applies to contracts for labor or materials by a general contractor or subcontractor. The Legislature granted the same protections to design professionals (and others) in a new Section 272.0001 as well as revisions in Chapters 272.001 and 272.002. Attorney Fees for Claims Against the State HB 2121, amending Section 2260.003 of the Government Code, was meant to clean up state breach of contract claims. It mandates attorneys’ fees for a breach of contract by the state as to engineering, architectural, or construction service claims currently conducted through the State Office of Administrative Hearings. Indemnity for Architects and Engineers HB 3021, amending Section 2254.0031 of the Government Code, addresses indemnity for government professional service contracts. It provides that a state or governmental entity may not require an architect or engineer to defend the state for claims or liabilities resulting from the negligent acts or omissions of the state governmental entity or its employees. Existing law limiting indemnity obligations of architects and engineers [Local Government Code, Sec. 271.904(a)-(e)] is expanded to include all state agencies, including departments, commissions, boards, offices, or other agencies in the executive or legislative branch; higher education institutions; and judicial branch entities. License for Journeyman Industrial Electricians At present, if an electrical apprentice chooses to become licensed as a journeyman, the apprentice must become proficient in areas that are not relevant for work in an industrial setting. HB 1698, amending Section 1305 of the Occupations Code, was designed to alleviate the additional requirements for an electrical apprentice interested in industrial work and who wishes to become licensed as a journeyman. This bill removes the regulatory burden by providing a better licensing alternative for electrical apprentices who work exclusively in industrial settings and provides journeyman licensing based on industrial specific training and testing. A journeyman industrial electrician would then be restricted to working in an industrial setting under the license. The bill does not add a new licensing requirement. Electrical apprentices working in the industrial field will not be required to obtain this license. Instead, the bill offers a more appropriate path for electricians to gain the journeyman license status that reflects their expertise in the field. Background Checks For Employees of Public School Contractors HB 3270, amending Section 22.0834 of the Education Code, provides background checks required for public school contractor’s employees. This bill requires school district and charter school contractors and subcontractors to prevent their employees from providing services at any public school if the employee has been convicted of a felony offense involving individuals under 18 years of age within the last 30 years. The bill provides that contractors or subcontractors can be required to submit criminal background information to the contracting school system, including fingerprinting and photographs of all employees who may have an opportunity for direct contact with students. Under this bill, the contractors and subcontractors will have to attest that they have received and analyzed all criminal background histories related to employees who potentially have direct contact with students. This statute, however, will not apply to the construction of new school facilities or for construction work to be completed at least seven days before the facility will be used for instructional services or when the contractor’s employees and students are kept separate. Pre-suit Notice Bill for Hail Claims HB 1774 addressed hail damage insurance claims. The bill requires an insured to provide written notice to the insurer at least 61 days before filing the claim against an insurer or agent relating to damage to real property caused by an earthquake, earth tremor, wildfire, flood, tornado, lightning, hurricane, hail, wind, snowstorm, or rainstorm. The pre-suit notice must provide a statement of the acts giving rise to the claim, the specific amount alleged to be owed, and amount of reasonable and necessary attorneys’ fees already incurred by the claimant. The bill also requires a court to abate the action if the defendant filed a motion for abatement and the court found the defendant did not receive pre-suit notice or was denied a request to inspect, photograph, or evaluate the property. Abatement will continue for the later of 60 days after complying notice was given or 15 days after the requested inspection occurred. Under the law, attorneys’ fees will be calculated as the lesser of the following: the amount of reasonable and necessary attorneys’ fees supported by sufficient evidence at trial and determined to have been incurred by the claimant in bringing the action; the amount of attorneys’ fees that may be awarded to the claimant under any other applicable law; or the amount to be awarded in the judgment, divided by the amount alleged to be owed, then multiplied by the total reasonable and necessary attorneys’ fees supported by sufficient evidence and determined to have been incurred in bringing the action. The bill requires the court to award the full amount of reasonable and necessary attorneys’ fees if the amount to be awarded in the judgment divided by the amount alleged to be owed was at least 0.8, not limited by statute, and recoverable. The court is prohibited from awarding attorneys’ fees if this fraction was less than 0.2, or if the claimant failed to provide pre-suit notice. County Code Enforcement HB 2040 amends Sections 233.155 and 233.157 of the Local Government Code. It now mandates inspection and notice requirements for residential construction as it relates to county regulations. The enforcement provision for unincorporated areas of certain counties allowed both civil suits and prosecution to proceed against persons that failed to provide proper notice of inspections and compliance with building codes. The enforcement provision differed enough from the penalty provision to create a loophole. The amendment eliminated the enforcement loophole. Right to Repair HB 1463, amends Section 121.004(b) of the Human Resources Code, and creates new Section 121.0041. It addresses the right to repair for allegations of failure to comply with certain standards to accommodate persons with disabilities. The bill requires that written notice must be provided before a claim can be filed, and the party against whom the violations are alleged will have 150 days to correct any violations before a claim can be filed. Conclusion Very little of Texas construction law practice was affected by the 85th Legislature. Grateful recognition is given to Ben Westcott who guided bills in the Legislature and contributed to this article. CRIMINAL LAW By Allen D. Place Jr. and Shea Place Sanctuary cities, courthouse security, and improper studenteducator relationships were front-page criminal justice issues leading into the start of the regular session of the Texas Legislature on January 10, 2017. Lawmakers debated these topics and others at length over the 140-day session. The 85th Legislature featured two new Texas House chairmen: Rep. Joe Moody on the Criminal Jurisprudence Committee and Rep. James White on the Corrections Committee. Sen. John Whitmire chaired the Senate Criminal Justice Committee. Legislation addressed numerous high-profile criminal justice issues and further refinements of certain statutes enacted in 2015, such as non-disclosures, were signed into law by the governor. In 2015, Sen. Charles Perry authored and Rep. Abel Herrero sponsored SB 1902, which altered the concept of non-disclosures in criminal cases. This bill, for the first time in Texas, allowed a non-disclosure on certain non-violent misdemeanor convictions and allowed for immediate and less expensive non-disclosures for certain misdemeanors. The following bills passed in 2017 and were precipitated by SB 1902: HB 3016 allows individuals with a DWI conviction with blood alcohol content lower than 0.15 percent and with no accident involving personal injury to another person to petition for non-disclosure. The bill does require a waiting period, which will vary depending upon the BAC and whether the individual had an interlock device during supervision. The provisions relating to DWI are retroactive. The bill prospectively clarifies eligibility for a non-disclosure for persons placed on community supervision for certain non-violent offenders. HB 557 clarifies that expunctions for fine-only offenses can be filed in justice of the peace and municipal courts. HB 322 and HB 3069 allow for expunction for veterans court pretrial diversions and clarifies non-disclosure relief for veterans in case specific situations. HB 322 expands the list of eligible offenses for non-disclosure if the defendant was a victim of human trafficking. Perhaps the most contentious bill of the session was SB 4, commonly called the “sanctuary cities” bill. Although the term sanctuary city is not well defined, this bill prohibits local government entities and campus police from adopting certain types of policies, patterns, or practices that prohibit the enforcement of state or federal immigration law. Entities and departments could not have a pattern or practice of prohibiting their employees from: (1) inquiring into the immigration status of those under a lawful detention or under arrest (including information regarding the person’s place of birth); (2) sending certain information about those arrested to, or requesting it from, federal officials; (3) maintaining the information or exchanging it with other local entities or campus police departments or federal or state government entities; (4) assisting or cooperating with federal immigration officers as reasonable or necessary; and (5) allowing federal immigration officers to enter and conduct enforcement activities at jails. When investigating an offense, peace officers could ask about witnesses’ or victims’ immigration statuses only if necessary to investigate the offense or to provide the victim or witness with information about federal visas designed to protect individuals who assisted law enforcement. Peace officers would not be prohibited from conducting separate investigations of other alleged offenses. Officers also would not be prohibited from making such inquiries if there was probable cause to believe the victim or witness committed a separate crime. The bill gives the attorney general the ability to sue local entities or departments to compel compliance with SB 4 with the possibility of fines being assessed against an entity or department not in compliance. SB 4 also requires law enforcement agencies to take certain actions when they have custody of an individual subject to a federal detainer; i.e., compliance is required. SB 4 creates a new crime for law enforcement authorities that knowingly fail to comply with immigration detainers. The penalty is a Class A misdemeanor and a conviction provides grounds for removal from office. Finally, SB 4 allows law enforcement agencies to adopt a written policy promoting community outreach designed to educate the public that peace officers may not inquire into the immigration status of crime victims or witnesses unless it is necessary to investigate the offense or to provide information regarding details of the federal visa program. Significant changes were made to the Texas Penal Code and Code of Criminal Procedure relating to improper educator-student relationships. SB 7 broadens the requirement that the educator or student be from the same school to include a student the educator knows is enrolled in a public or private primary or secondary school. Numerous sections of the bill address communication and reporting issues regarding school districts and provide felony punishment for school district officials who fail to report conduct in specific situations. Other new legislation established two notable new crimes in the state. SB 179 and HB 306 were companion bills seeking to address cyberbullying. The new law requires school districts to address such online harassment through policy changes and creates a misdemeanor offense if the act is committed against a child under the age of 18 with the intent that the child commit suicide or engage in conduct causing serious bodily injury to the child or if the actor violated a prior restraining order or injunction. SB 1232 creates the offense of bestiality. The new Penal Code section describes 10 categories of action that define the offense, which is classified as a state jail felony but can be enhanced to a third-degree felony with aggravating circumstances. The Timothy Cole Exoneration Review Commission made several legislative recommendations to the Legislature. SB 1253 and HB 34 included the following: • Requires every custodial interrogation of an individual suspected of certain felonies to be electronically recorded. No statement produced from a custodial interrogation would be admissible in a criminal trial unless the interrogation was electronically recorded except if the prosecuting attorney could show good cause existed for such failure; • Makes evidentiary changes relative to impeachment of testifying witnesses who receive a benefit from such testimony; • The Texas Forensic Science Commission shall conduct a study regarding the use of drug field test kits and crime scene investigations in this state; and • The Texas Commission on Law Enforcement shall establish a comprehensive education and training program on eyewitness identification. SB 1849, deemed the Sandra Bland Act, revises the Code of Criminal Procedure regarding identification and screening of an arrestee who might be a person with a mental illness or an intellectual disability. The Commission on Jail Standards is required to adopt rules and procedures addressing jail safety and establishing requirements for reporting serious incidents in jail. Training requirements are enhanced for certain law enforcement authorities and reporting requirements expanded. The current 72-hour notice for sheriffs to notify a magistrate of a person in custody who may have a mental illness or intellectual disability is reduced to 12 hours. Law enforcement agencies are required to make a good faith effort to divert individuals suffering from mental illness, if possible, and sheriffs have to make a more detailed monthly report regarding inmates’ injuries or death. SB 1849 requires 40 hours of training for law enforcement officers regarding de-escalation and crisis intervention, amends requirements for racial profiling policies, and requires additional information to be reported by peace officers making motor vehicle stops. SB 1584 creates an obligation for courts and counties to implement a validated risk assessment tool for the purpose of assessing the risks and needs of a defendant when setting terms of probation. It mandates that a judge must consider these results when setting terms of supervision and the defendant’s ability to satisfy employment, education, and financial obligations. SB 42 was named the Judge Julie Kocurek Judicial and Courthouse Security Act of 2017. Kocurek is a state district judge from Travis County who was shot at her residence prior to the legislative session. Judge Kocurek returned to the bench months after the incident. The bill in her honor is a comprehensive effort to provide improved and updated security to elected officials working in state, county, and municipal government. SB 42 provides for the following: • Sets up a court security committee to establish appropriate security measures for courts; • Court security personnel must hold a court security certification; • The Texas Commission on Law Enforcement will develop a court security training program in conjunction with the Office of Court Administration. OCA will also create a judicial security division; and • Enhances privacy in public records for elected officials. Overall, the 85th Legislature made strides in the areas of criminal jurisprudence and corrections. Judicial safety is expected to improve as a result of SB 42, and HB 34 should reduce the number of wrongful convictions. ESTATE, GUARDIANSHIP, AND TRUST LAW By William D. Pargaman This article contains a summary of 2017 statutory changes affecting decedents’ estates, guardianships, trusts, powers of attorney, and other areas of interest to estate and probate practitioners. Due to space constraints, many changes in these areas are omitted. However, a more detailed version of these materials, including a list of effective dates, is available at snpalaw.com/resources/2017legislativeupdate. Decedents’ Estates The State Bar of Texas Real Estate, Probate, and Trust Law Section’s decedents’ estate bill, HB 2271, contained a number of “miscellaneous” changes. Small estate affidavits may now be used for estates up to $75,000 (up from $50,000). A four-year statute of limitations, measured from a will’s admission to probate, was added to the will reformation provision enacted in 2015. This does not limit the time to reform the provisions of a testamentary trust contained in a will under the newly enacted trust reformation provision. As newspapers consolidated printing operations into fewer counties, it became more difficult to find one printed in the county of the decedent’s residence for publication of the notice to creditors. It may now be printed in a newspaper of general circulation in the county. And in a purely stylistic change, numerous statutory references to “last will and testament” were shortened to just “will.” The REPTL guardianship bill, SB 39, was amended to add a non-REPTL provision allowing a court to remove an executor who has failed to file the affidavit of notice to beneficiaries after 30 days’ notice by certified mail, rather than personal service. HB 1814 requires all applications to probate wills or to open administrations to include the last three digits of both the applicant’s and the decedent’s driver’s licenses and social security numbers. HB 1877 authorizes a court to fine an executor up to $1,000 for misrepresenting in an affidavit in lieu of inventory that all required beneficiaries received a copy of the inventory. SB 499 adopts the Uniform Partition of Heirs Property Act, which limits the ability of any tenant-in-common to seek a partition of family-owned real estate. It’s almost impossible for cotenants to adversely possess property against the remaining cotenants, since all tenants have an equal right to possession of the property, and therefore, possession by any of them is not “adverse” to the others. After failing to pass during the last three sessions, SB 1249 now outlines a procedure for a cotenant to adversely possess the property if the tenant meets specified requirements after adversely possessing for 10 years. Guardianships SB 39 also contained a number of “miscellaneous” changes, including several non-REPTL provisions added as the bill moved through the Legislature. Last session, HB 4058 required interested persons wishing to intervene in a guardianship proceeding to obtain leave of the court. This requirement now won’t apply to any person who was entitled to notice of the original proceeding. A non-REPTL provision authorizes notice to a guardian by certified mail, rather than personal service, if a court attempts to remove the guardian on its own motion (personal service is still required if the motion to remove is filed by anyone else). The bill clarifies that supporters in supported decision-making agreements (authorized in 2015) owe fiduciary duties to the principal regardless of whether the statutory form of supported decision-making agreements is used. The bill also includes a non-REPTL provision authorizing a court to transfer a guardianship proceeding to another county on its own motion if the ward resides in that other county. Last session, HB 2665 added provisions requiring a guardian to notify certain relatives of significant events in the ward’s life (e.g., death, admission to acute care facility for more than three days, change of residence). SB 1709 now requires those relatives to make an affirmative election to receive those notices. The initial citation or notice to the relative must notify them of this election requirement, and guardians in existing guardianships must notify the relatives of this requirement as soon as possible, but no later than September 1, 2019. SB 1710 makes last session’s restrictions on interventions by interested persons inapplicable to any application to find that the ward has regained some or all of the ward’s capacity. SB 1016 authorizes the judge of a court handling guardianships (other than statutory probate courts) to appoint a court investigator if authorized by the commissioners court. SB 1096 makes a number of changes, including directing the Texas Supreme Court to establish a registration program for all guardianships and maintain a central database of those guardianships, with certain information made available to law enforcement. Trusts The REPTL trust bill, SB 617, authorizes modification of a trust to qualify a distributee for governmental benefits. It also includes provisions authorizing reformation, as opposed to modification, for the same reason, to prevent waste or impairment, to achieve the settlor’s tax objectives, or to correct a scrivener’s error. Decanting provisions have been liberalized. Now, a trustee has “limited discretion” if its power to distribute principal is either mandatory, or limited by an ascertainable standard. Anything broader is “full discretion,” giving the trustee broader authority and more flexibility in decanting. Decanting is no longer prohibited merely because it would materially impair the rights of any beneficiary. (Keep in mind, however, that a trustee exercising a power to decant owes fiduciary duties to the beneficiaries, just like when the trustee is exercising a power to sell real property.) The authority of a trustee to employ agents is expanded to recognize a trustee’s ability to delegate authority to engage in a laundry list of powers related to real property transactions. The bill also clarifies venue of trust proceedings where there are multiple trustees, none of whom is a corporate trustee. Powers of Attorney and Advance Directives The REPTL financial power of attorney bill, HB 1974, makes a number of changes, some of which are based on the 2006 Uniform Power of Attorney Act, but many of which are unique to Texas. The most significant (and most controversial) change is a requirement that third parties must accept a power of attorney unless one of numerous exceptions apply. For example, a third party presented with a power of attorney may request a certification from the agent, an opinion from the agent’s attorney, or an English translation. Even if provided, there are still many grounds for refusing acceptance, including the possibility that the third party may have had no duty to engage in a similar transaction with the principal. The bill also fills in many gaps in Texas’ power of attorney statute, including agent compensation and standing to determine the validity of a power or to review the agent’s conduct. See the online update mentioned at the beginning of this article for more details. This bill, the REPTL guardianship bill, and the REPTL digital assets bill all make changes to the statutory durable power of attorney form. The REPTL medical power of attorney bill, HB 995, revokes the authority of a spouse upon dissolution of the marriage and inserts the once-separate disclosure statement into the medical power form itself. Use of the statutory medical power of attorney form remains mandatory, so the new form must be used beginning January 1, 2018. Two other REPTL bills, SB 511 and HB 1787, authorize the use of one notary in lieu of two witnesses for guardianship declarations (for oneself, not for children) and declarations of mental health treatment. In the case of guardianship declarations, they will be considered self-proved merely with the principal’s acknowledgment. Two witnesses are still required to disqualify anyone from acting as guardian, in which case a standard self-proving affidavit is advisable. HB 2425 requires a hospital to allow a patient, the patient’s guardian, or the patient’s surrogate decision-maker the opportunity to designate a caregiver upon the patient’s admission or before discharge. The hospital must consult with the patient and designated caregiver regarding the caregiver’s capabilities and limitations and issue a discharge plan to meet the patient’s aftercare needs. Nontestamentary Transfers The REPTL decedents’ estates bill clarifies that multiparty accounts are liable for their share of estate taxes, and, if other estate assets are insufficient, amounts needed to pay debts, other taxes, and administration expenses. Also, if spouses with a joint account with survivorship rights divorce, rights in favor of the former spouse or relatives are revoked. SB 714 modifies the optional statutory account form to include an acknowledgment by the customer that he or she has read each paragraph, received a disclosure of the ownership rights to each type of account, and has placed his or her initials next to the type of account desired. If the institution does not use the statutory form, it must either make the required disclosures separately from other account information (current law), or if included in other account documentation, the disclosures must be the first item of the documentation (new law). The disclosure obligations won’t apply to credit unions or to a customer who is a legal entity or is acting as a legal representative for another person. SB 2150 adds anti-lapse provisions for the share of certain deceased transfer on death deed beneficiaries. SB 869 directs the creation of a motor vehicle title with a beneficiary designation. Uniform Fiduciary Access to Digital Assets Act The REPTL digital assets bill, SB 1193, enacts the Texas Revised Uniform Fiduciary Access to Digital Assets Act, which deals with issues faced by fiduciaries trying to access a principal’s digital assets. More information on this uniform act may be found at http://www.uniformlaws.org/Act.aspx?title= Fiduciary Access to Digital Assets Act, Revised (2015). Jurisdiction and Venue The REPTL guardianship bill includes a non-REPTL provision authorizing a court to transfer a guardianship proceeding to another county on its own motion if the ward resides in that other county. The author would like to acknowledge the contributions of Craig Hopper, who took over as legislative chair in 2015. FAMILY LAW By Brian L. Webb and Brant M. Webb This article will provide a summary of notable family law-related bills passed during the 2017 legislative session. A complete listing of relevant legislation may be found on the State Bar of Texas Family Law Section website at sbotfam.org (access is restricted to members only). Unless otherwise noted, all legislation applies to proceedings commenced on or after the effective date. Readers can access the full text of the bills discussed in this article online using the Texas Legislature Online Bill Lookup tool at legis.state.tx.us. Title 1: The Marriage Relationship HB 3052 amends Section 6.405 of the Family Code and expands the information required to be referenced in and attached to a divorce petition related to protective orders or pending applications. The bill provides that, along with effective protective orders or pending applications thereon under Title 4 of the code, effective protective orders or pending applications thereon under Chapter 7A of the Code of Criminal Procedure or those for emergency protection under Article 17.292 of the Code of Criminal Procedure must be referenced. A copy of each order (but not any pending application) must be attached to the petition. If a copy of the order is unavailable at the time of filing, the petition must state that a copy will be filed with the court before any hearing. The law is effective September 1, 2017. HB 2703 amends Section 6.502 of the Family Code by adding Subsection (c). The legislation creates transparency in temporary receivership appointments during divorce proceedings by requiring the court to issue, within seven days of the receiver’s appointment, findings of fact and conclusions of law justifying the appointment. The court must also provide justification if it requires bond in connection with the appointment— something typically required to cover the cost of the receivership. The law is effective September 1, 2017. SB 1237 seeks to update and clarify procedures in a suit for dissolution of a marriage or a suit affecting the parent-child relationship. Among other things, the bill amends Section 6.709 of the Family Code to expand the trial court’s authority in rendering temporary relief during a divorce proceeding. Additionally, it authorizes the trial court to modify a previous temporary order if a party’s circumstances have materially and substantially changed since the rendition of the previous order and modification is equitable and necessary for the preservation of the property or for the protection of the parties during an appeal. Further, the bill authorizes a party to seek review of the trial court’s temporary order by motion filed in the court of appeals with jurisdiction by proper assignment in the party’s brief or by petition for writ of mandamus. The bill removes the requirement that a request for findings in a case in which court-ordered possession of a child varies from the standard possession order (including for a child under three years of age) be made or filed not later than 10 days after a hearing. The bill requires such a request to conform to the Texas Rules of Civil Procedure and repeals the deadline for a court to make required findings in support of a possession order for a child less than three years of age. Additionally, SB 1237 changes the period during which a party may file a written request for findings relating to resources in a child support order from not later than 10 days after the date of the hearing to before the final order is signed but not later than 20 days after the date of the rendition of the order. The bill, effective September 1, 2017, repeals the deadline for a court to make and enter such required findings. Title 4: Protective Orders and Family Violence HB 249 redefines family violence under Section 71.004 of the Family Code by expanding the definition of abuse to include forcing or coercing a child to enter a marriage. Additionally, the bill makes the definition for “abuse” and “neglect” the same across the Department of Family and Protective Services, or DFPS. Previously, there had been no uniform statutory definition for “abuse” and “neglect” within DFPS. The bill, effective September 1, 2017, also gives Child Protective Services the authority to investigate cases of alleged abuse and neglect that occur at a child-care facility and ensures that this function cannot be transferred. SB 712 makes felony-level family violence offenses eligible for protective orders exceeding two years. A court may now render a protective order that exceeds two years if the court finds that the person subject to the order committed an act constituting a felony offense involving family violence (e.g., continuous violence against the family or continuous violation of a protective order) regardless of whether the person has been charged with or convicted of the offense. The law is effective September 1, 2017. Title 5: The Parent-Child Relationship and Suit Affecting the Parent-Child Relationship HB 1501 is a “cleanup bill” regarding processes relevant to child custody evaluations. Among other things, the bill codifies caselaw providing that evaluators are immune from civil liability in the same manner as other officers of the court. The bill clarifies that all the statutory steps in an evaluation must occur unless the evaluator explains why one or more functions have not taken place. Additionally, it makes clear that interviews of a child of any age are no longer required— only for children four years of age or older. Further, the bill specifies the kinds of documents a child custody evaluator must have access to, including criminal history information, when forming an opinion regarding the child’s custody arrangements. Finally, the new law, effective September 1, 2017, mandates that disclosure of the contents of the child custody evaluation report to the court—not just the jury—are also subject to the rules of evidence. HB 1495 expands Section 156.006(b) of the Family Code and prohibits a trial court, while a suit for modification is pending, from rendering a temporary order that has the effect of creating or changing a designation of the person who has the exclusive right to designate the primary residence of the child or the effect of creating, changing, or eliminating a geographic area within which a conservator is required to maintain the child’s primary residence (rather than a temporary order that has the sole effect of changing the designation of the person who has the exclusive right to designate the primary residence of the child) under the final order unless the temporary order is in the best interest of the child and the circumstances set forth in Subsections (b)(1)-(b)(3) apply. The law is effective September 1, 2017. (Note: The affidavit requirement as outlined in Subsection (b-1) and passed during the 2015 legislative session may still apply, depending on the circumstances.) Other Legislation HB 45, effective September 1, 2017, amends the Government Code and requires the Texas Supreme Court to adopt rules and provide judicial instruction regarding the application of foreign laws in certain family law cases (divorce or suit affecting the parent-child relationship). (Note: Rules must be adopted “as soon as practicable” following the effective date but not later than January 1, 2018.) HB 1217, effective July 1, 2018, amends the Government Code and the Texas Civil Practice and Remedies Code to allow for online notarization in lieu of a physical appearance before a notary public. Online notarization may be performed by means of two-way video and audio conference technology that meets certain standards of the Government Code (Skype, FaceTime, etc.). This is a reminder that the Family Code provisions related to dental insurance/support that passed during the 2015 session take effect September 1, 2018. Note: SB 1444, relating to de novo hearings in child protection cases, was vetoed. Among other things, the bill would have: (1) prohibited a party from requesting a de novo hearing on a default judgment or agreed order and (2) mandated a hearing be held not later than the 45th day after the hearing request. The authors wish to express appreciation to the Hon. Judy K. Warne and Warren Cole for their tireless efforts monitoring legislation. INSURANCE By Daniel Kruger The 85th Texas Legislature enacted extensive changes to the regulation of reinsurance,1 insurance holding company systems,2 the regulation of captive insurance companies,3 surplus lines insurers,4 and the manner in which a foreign mutual insurance company may conduct business in Texas.5 If you are advising these entities, you should review the specific changes, but they should be of little concern to the general practitioner. An overview of significant changes to insurance law follows. Statutory Damages for Property Damage Claims A new chapter has been added to the Insurance Code, giving consumers the right to recover statutory damages for non-payment of property damage claims.6 This applies to an action on a claim against an insurance company or insurance agent alleging a breach of contract, negligence, misrepresentation, fraud, or breach of a common law duty.7 The claimant is required to give at least 60 days written notice to the insurance company or agent to file an action under this chapter.8 The person receiving the notice has 30 days from the date of the receipt to send a written request to the claimant to arrange to inspect the property that is the subject of the claim.9 An insurance company that is a party to litigation may elect or accept whatever liability the insurer’s agent might have to the claimant by providing written notice.10 If the insurance company accepts liability, the evidence of the agent’s acts or omissions may still be offered at trial, and a judgment against the company must include any liability that would have been assessed against the agent.11 The insurer is not allowed to make this election if it is in receivership at the time the claimant commences an action against the insurer.12 If a defendant proves that it was entitled to but did not receive the pre-suit notice as required at least 61 days prior to the date the action was filed, the defendant may file a pleading notifying the court of the failure to give the notice, and the court may not award the claimant attorneys’ fees that are incurred after the date the defendant files. The defendant’s pleading must be filed no later than the 30th day after the date the defendant files an original answer.13 Required Notice of Material Change in Coverage In regard to personal automobile insurance, homeowner’s insurance, or farm or ranch owner’s insurance, if the insurance company makes a material change to the existing policy coverage, the policy is considered canceled.14 Material change means either a reduction in coverage, changes to coverage conditions, or changes to the duties of the insured.15 However, an insurance company may avoid the cancellation by providing the policyholder with written notice of each material change in each form of the policy offered on renewal to the insured from the form of the policy held immediately before renewal.16 This must appear in a conspicuous place in the renewal notice, clearly indicate each material change to the policy being made on renewal, be written in plain language, and be provided to the insured no later than the 30th day prior to the date of renewal.17 The insurance company is also required to provide written notice to each agent of the insurance company’s election to make a material change to a policy form on renewal at least 30 days prior to the change being made.18 Cancellation and Non-Renewal of Liability Insurance Policy The Legislature changed the procedure for an insurance company to cancel or not renew a liability insurance policy for general, professional (other than medical professional), commercial automobile, commercial multi-peril, and any other type or line of liability insurance designated by the department. The insurance company may reduce or restrict coverage by endorsement or other means if it provides the insured with written notice of any material change in each form of the policy offered on renewal to the insured from the form of the policy held immediately before renewal.19 The notice must appear in a conspicuous place in the notice of renewal, clearly indicate each material change to the policy being made, be written in plain language, and be provided to the insured no later than the 30th day before the renewal date.20 This notice is also required to be sent to each agent of the insurer and to indicate clearly each material change being made to the policy form.21 Notice to Lienholder of Cancellation Comprehensive or Collision Automobile Insurance Coverage The commissioner is required to adopt rules requiring an insurance company that is canceling a personal automobile insurance policy that provides comprehensive or collision physical damage coverage for an automobile subject to a purchase money lien to notify the lienholder, if known, that the coverage will be canceled.22 Review of Social Security Administration Death Master File Insurance companies issuing annuity and life insurance contracts are now required to at least semiannually compare their in-force policies with the records of the Death Master File or any other database or service that is at least as comprehensive in order to determine whether a person is deceased.23 Within 90 days of determining that an annuitant or insured is deceased, the insurer must make a documented good faith effort to locate and contact each beneficiary or other authorized representative on the relevant policy or contract24 and is prohibited from charging a fee for this service.25 The insurance company is required to deliver funds it holds to the Texas Comptroller within three years after the date the company completes the effort to locate beneficiaries or authorized representatives.26 Coverage for Mental Health Condition Health benefit plans providing benefits or coverage for medical or surgical expenses incurred as a result of a health condition, accident, or sickness and benefits for treatment expenses incurred as a result of a mental health condition or substance use disorder must cover mental health conditions and substance use disorders under the same terms and conditions applicable to the plan’s medical and surgical coverages.27 It may not impose quantitative or non-quantitative treatment limitations on benefits that are generally more restrictive than the quantitative or non-quantitative treatment limitations imposed on coverage of benefits for medical or surgical expenses.28 Expansion of Coverage for Mammography Insurance companies that previously provided coverage for low-dose mammography are now required to expand coverage to include a procedure known as breast tomosynthesis, which is a radiologic mammography procedure that produces cross-sectional digital three-dimensional images of the breast from which medical professionals can make breast cancer screening diagnoses.29 Health benefit plans must now include this expanded coverage.30 Hearing Aids and Chochlear Implants for Children Health benefit plans, including small employer plans that provide benefits for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, are now required to provide coverage for the cost of medically necessary hearing aids or cochlear implants and related services and supplies for a covered individual who is 18 or younger.31 The coverage must include fitting and dispensing services and the provision of ear molds as necessary to maintain optimal fit for hearing aids, any treatment related to hearing aids and cochlear implants, and for a cochlear implant, an external speech processor, and controller with necessary component replacement every three years.32 Step Therapy Protocols Health benefit plans may now require an enrollee to use a prescription drug other than what the enrollee’s physician recommends, called step therapy protocol.33 A plan that requires it before providing coverage for a prescription drug must establish, implement, and administer the protocol in accordance with clinical review criteria readily available to the health care industry.34 The plan shall take into account the needs of atypical patient populations and diagnoses in establishing review criteria, which must consider generally accepted clinical practice guidelines. The plan must also establish a user-friendly process through which a provider can submit an exception request on behalf of the patient35 on the standard form prescribed by the commissioner.36 Telemedicine Medical Services Health benefit plans can no longer exclude a covered health care service or procedure delivered by a preferred or contracted health professional to a covered patient as a telemedicine medical service or a telehealth service solely because it is not provided through an in-person consultation.37 A health benefit plan may require a deductible, a copayment, or coinsurance for a covered health care service or procedure.38 Health benefit plans are now required to adopt and display in a conspicuous manner on the issuer’s website the policies and payment practices for telemedicine medical services and telehealth services.39 Out-of-Network Claim Dispute Resolution The procedure for dealing with out-of-network claim dispute resolution now requires that when a bill is sent to an enrollee by a facility-based provider or emergency care provider or when an explanation of benefits is sent to an enrollee by an insurer or an administrator for an out-of-network health benefit claim eligible for mediation, the bill must contain in no less than 10-point boldface type, a conspicuous, plainlanguage explanation of the mediation process, including information on how to request it and a statement that is substantially similar to the following: You may be able to reduce some of your out-of-pocket costs for an out-of-network medical or health care claim that is eligible for mediation by contacting the Texas Department of Insurance at tdi.texas.gov and 512-676-6000.40 Policy Approval Policy forms for commercial property insurance are now required to be filed with and approved by the Department of Insurance before they can be issued and delivered in Texas.41 This change pertains to policy forms including commercial fire, allied lines, commercial inland marine insurance, commercial crime coverage, boiler and machinery insurance other than explosion, glass insurance provided as part of other coverage, and insurance covering other perils or providing other coverages, as authorized by the commissioner. NOTES 1) Texas Insurance Code Section 493.001. 2) Texas Insurance Code Section 823.0147. 3) Texas Insurance Code Section 964.001. 4) Texas Insurance Code Section 981.071. 5) Texas Insurance Code Section 221.001(c). 6) Texas Insurance Code Section 542A. 7) Texas Insurance Code Section 542A.002. 8) Texas Insurance Code Section 542A.003. 9) Texas Insurance Code Section 542A.004. 10) Texas Insurance Code Section 542A.006. 11) Texas Insurance Code Section 542A.006(g). 12) Texas Insurance Code Section 542A.006(h). 13) Texas Insurance Code Section 542A.007(d). 14) Texas Insurance Code Section 551.103. 15) Texas Insurance Code Section 551.1055(a). 16) Texas Insurance Code Section 551.1055(b). 17) Texas Insurance Code Section 551.1055(c). 18) Texas Insurance Code Section 551.1055(d). 19) Texas Insurance Code Section 551.1055. 20) Texas Insurance Code Section 551.1055(c). 21) Texas Insurance Code Section 551.1055(d). 22) Texas Insurance Code Section 551.1041. 23) Texas Insurance Code Section 1109.011. 24) Texas Insurance Code Section 1109.012(c). 25) Texas Insurance Code Section 1109.012. 26) Texas Insurance Code Section 1109.013(b). 27) Texas Insurance Code Section 1355.254. 28) Texas Insurance Code Section 1355.254(b). 29) Texas Insurance Code Section 1356.001(1). 30) Texas Insurance Code Section 1356.002(a). 31) Texas Insurance Code Section 1367.253(a). 32) Texas Insurance Code Section 1367.253(b). 33) Texas Insurance Code Section 1369.051(5). 34) Texas Insurance Code Section 1369.0545(a). 35) Texas Insurance Code Section 1369.054(a). 36) Texas Insurance Code Section 1369.0546(b). 37) Texas Insurance Code Section 1455.004(a). 38) Texas Insurance Code Section 1455.004(b). 39) Texas Insurance Code Section 1455.006(a). 40) Texas Insurance Code Section 1467.0511(a). 41) Texas Insurance Code Section 2301.002(1). LEGISLATIVE AND CAMPAIGN LAW By Ross O. Peavey At the start of the 85th Texas legislative session, Gov. Greg Abbott designated “ethics reform” as one of four emergency items in his State of the State address. This designation, followed up with a gubernatorial proclamation, set up the constitutional framework allowing ethics legislation to get a head start in the always-compact legislative calendar. The result was the passage of a number of bills into law that will tighten ethics requirements for public officials. With the enactment of HB 501, lawmakers and public officials will be required to publically release information on business relationships with government entities. Under the new law, government officials must make public any ownership stakes of 5 percent or more in business entities. The law previously required disclosure of 50 percent. The legislation also dictates new dollar-amount thresholds for government contracts to be disclosed. If the aggregate cost of goods or services sold under one or more of these contracts exceeded $10,000 in the year covered by the report, the official would have to identify each contract in the amount of $2,500 or more. The new law compels disclosure of certain combined interests of immediate family members or the officials themselves. This provision applies to spouses or dependent children of an official and requires disclosure for an agency or department of the state or a political subdivision. It also requires legislators providing bond counsel services to make public their relevant government clients. Legislators also tightened the rules for retiring lawmakers who become lobbyists. HB 505 prohibits retired legislators from using their remaining campaign funds to make certain political contributions. Under the bill’s provisions following the conclusion of the legislator’s term in office, the former lawmaker or current lobbyist may not knowingly make, or authorize from political contributions they accepted as candidates or officeholders, a political expenditure that is a political contribution to another candidate, officeholder, or PAC. The Legislature also voted, with the passage of SB 500, to strip their office and pension from certain officials convicted of felony public corruption. Lawmakers also made changes that will affect voters, those running for office, and election administration. Some of these, such as new voter identification legislation, will be familiar to longtime observers of the Legislature, while others reflect new issues, which became salient this session. One change that Texas voters will surely notice was brought about by HB 25, which eliminates straight-party voting and repeals several sections of the Election Code that reference the practice. With the enactment of the bill, Texans must individually fill out each position on a ballot that they wish to vote for. However, do not be surprised if you still see a straight-party option the next time you go to the polls— the bill does not take effect until 2020. The Legislature again tackled voter identification by passing SB 5 following federal court determinations that the state’s voter ID system was racially discriminatory. In 2011, the Legislature changed the law to require, with limited exceptions, a voter to provide photo identification in order to vote, which led to a number of challenges in federal court. Prior to the 2016 general election, a federal district court found—and the 5th Circuit Court of Appeals affirmed— that the state law was in violation of the federal Voting Rights Act. The state responded with an interim plan, which was used in the November 2016 election. Under the plan, voters were allowed to vote if they could present acceptable forms of photo identification that had not been expired for more than four years. Voters who did not have the adequate forms of identification were permitted to vote with a regular ballot if they filled out a reasonable impediment declaration and could present a valid voter registration certificate, certified birth certificate, current utility bill, bank statement, government check, paycheck, or any other government document displaying the voter’s name and address. SB 5 was designed to address the law following the court’s interim order. The bill revises the photo identification requirements and increases penalties for voters who cannot provide identification and incorrectly fill out a reasonable impediment declaration. HB 1735 authorized county clerks to remove, replace, or reassign an election judge or an election clerk who causes a disruption in a polling place or willfully disobeys the law. The Legislature also eliminated some restrictions on judges and judicial candidates’ political funds with the passage of HB 3903, bringing the law regarding judicial candidates funds closer to those of other candidates in the Election Code. HB 658 allows a voter with a medical condition or a disability that impairs his or her mobility to be given priority at a polling place. REAL ESTATE By Richard L. Spencer and Richard A. Crow This article is drawn from the report of the Real Estate Legislative Affairs Committee of the Real Estate, Probate and Trust Law Section of the State Bar of Texas, which reports summarized legislation passed during the 85th Texas Legislature affecting real estate, mortgage lending, and related topics of interest to real estate lawyers. Some of the more noteworthy legislation included in the report is discussed in this article. If approved by the voters in November, SJR 60 will usher in the most significant changes to home equity lending in Texas since voters first approved the practice in 1997. An in-depth discussion is beyond the scope of this article, but a few key provisions that are likely to contribute to an uptick in home equity lending should be noted. Perhaps most significant is the reduction of the fee cap from 3 percent to 2 percent of the loan amount, which is coupled with the exclusion of many loan-related fees from the cap, including inter alia, discount points, title insurance premiums, appraisal fees, and survey fees. These exclusions will greatly simplify lender-compliance with the fee cap and as a result, largely eliminate one of the major disincentives for lenders to make home equity loans in this state. SJR 60 also removes restrictions on home equity loans involving agricultural property and—subject to certain conditions and limitations—allows home equity loans to be refinanced as rate and term loans no longer subject to home equity lending requirements. HB 1217 is the so-called e-notary bill, which allows documents to be notarized remotely using two-way video and audio conference technology and provides that the acknowledging person does not need to be in Texas at the time of notarization. The secretary of state is responsible for developing standards and rules for online notarization and is given plenty of time to do so, as the law does not take effect until July 1, 2018. HB 1470 and HB 1128 are two pieces of legislation that alter the non-judicial foreclosure process in Texas. First, HB 1470 allows a trustee or substitute trustee to contract with an attorney and auction company to conduct the sale. The law requires the winning bidder at the public sale, if it is not the foreclosing mortgagee or mortgage servicer, to provide the trustee or substitute trustee with relevant information. If the winning bidder fails to do so, then the trustee may reject the bid. A trustee or substitute trustee must now keep funds from a sale in a separate account and maintain account records of deposits and disbursements. Disbursement of sale proceeds is provided in this bill, and it now requires the trustee to make “reasonable attempts to identify and locate the persons” entitled to them. What is considered a reasonable fee for the trustee is outlined, and, even though such fee is earned at the time of the sale, the fee and any reasonable actual costs are only paid from funds remaining after the foreclosed lien is paid. Previously, if the first Tuesday of the month fell on January 1 or July 4, non-judicial foreclosure sales were still held at the location designated by the commissioners court in each Texas county. HB 1128 changed the date and time for non-judicial foreclosures to be between 10 a.m. and 4 p.m. on the first Wednesday of those months. It also establishes that public sales of real property by court order and foreclosures of tax liens (unless conducted by online bidding and sale) will also be carried out on the same date and time as non-judicial foreclosures (i.e., between 10 a.m. and 4 p.m. on the first Tuesday of a month, or if the first Tuesday of a month occurs on January 1 or July 4, between 10 a.m. and 4 p.m. on the first Wednesday of the month). Foreclosures of tax liens conducted using online bidding may begin at any time and must conclude by 4 p.m. on the first Tuesday of a month, or if the first Tuesday of a month occurs on January 1 or July 4, then they must be concluded by 4 p.m. on the first Wednesday of that month. HB 3879 is one of the most interesting pieces of legislation, as it allows non-lawyers to practice in county and district courts. This amendment to Section 24.011 of the Property Code provides that in an appeal of an eviction suit for nonpayment of rent, an individual owner of a multifamily residential property may be represented by an authorized agent who does not need to be an attorney, or, if the owner is a corporation or other legal entity, then by an employee, owner, officer, or partner of the landlord who does not need to be an attorney. HB 1974 makes sweeping changes to the laws governing durable powers of attorney. The new law requires that a durable power of attorney must be accepted under most circumstances. Upon request within timeframes established by the statute, an agent must provide a certification or an opinion of counsel to confirm the validity of an instrument, but if these are provided in compliance with the statutory requirements, then the instrument must be accepted. HB 1974 is intended to facilitate more widespread use and acceptance of powers of attorneys and will almost certainly have that effect. Financial institutions, and title companies in particular, will be impacted, as the new law will require new policies and procedures to ensure compliance. SB 1955 clarifies that recording an expunction of notice of lis pendens does not give actual or constructive notice of any matters relating to the subject of the notice. The statute provides that real property may be transferred or encumbered free of all matters asserted or disclosed in the expunged notice and the litigation related thereto. These clarifications should go a long way in addressing concerns that a third-party (e.g., a lender) might be deemed to have knowledge of a title dispute, notwithstanding that a notice of lis pendens had been expunged. SB 2212 relates to certain real estate sales, brokerage, advertising activities, and functions of the Texas Real Estate Commission. A person without a real estate license is now permitted to buy and then sell or assign an option or an interest in a contract if: (1) the person does not use the option or contract to engage in real estate brokerage and (2) the person discloses the nature of the equitable interest to a potential buyer. A provision is added to the Texas Real Estate License Act that states that a person selling or assigning an option or an interest in a contract is “engaging in real estate brokerage” if the person does so without disclosing the nature of the interest to the buyer (being that the person does not have legal title to the property but merely has an option or an interest in a contract). The act prohibits the Texas Real Estate Commission from requiring, as part of the regulation of deceptive practices by licensed brokers or sales agents, a rule that the broker include the term “broker,” “agent,” or a similar designation, a reference to the commission, or the person’s license number in a broker’s advertisement. It also prohibits a broker from publishing an advertisement that implies that a sales agent is responsible for the operation of the broker’s real estate brokerage business or fails to include the name of the broker for whom the license holder acts (which may be an assumed name as authorized by law and registered with the Texas Real Estate Commission). SB 2212 adds a required disclosure that, prior to entry into a contract, a seller of an option or assignor of an interest in a contract discloses to the buyer that the seller is only selling an option or assigning an interest in a contract and does not have legal title to the property. Additional information regarding other laws that may impact your practice can be found in the committee report, which is available on the REPTL website, reptl.org (access is restricted to members only). As of the writing of this article, the upcoming special legislative session was set to consider a number of items of interest to real estate lawyers, including municipal annexation reform and property tax reform. The committee report will be updated to include any important legislation passed during the special session. THE TEXAS JUDICIARY By David Slayton and Megan LaVoie The numbers tell the story of an active session for the Texas judiciary. More than 1,700 bills were filed during the 85th legislative session that had a direct impact on the third branch of government. The Office of Court Administration, or OCA, analyzed and drafted 1,181 fiscal notes for the Legislative Budget Board and the Legislature appropriated a total of $699.5 million to the judicial branch courts and agencies in the Conference Committee Report for SB 1.1 The entire budget for the judiciary makes up just 0.4 percent of the state budget. The following is a brief description of some of the new legislation that will directly affect the judiciary and attorneys who practice in Texas courts. All bills are effective September 1, 2017, unless otherwise noted. A full legislative report published by the Texas Judicial Council, the policy making body for the judiciary, is available at txcourts.gov/media/1438072/85th-legislative-report.pdf. Increasing Compliance With Court Costs and Fees In his 2017 State of the Judiciary speech, Texas Supreme Court Chief Justice Nathan L. Hecht discussed what are commonly known as “debtors’ prisons,” the practice of jailing criminal defendants for being unable to pay their fines and court costs. He said a debtors’ prison is not only illegal under the U.S. Constitution, but it also keeps people “from jobs, hurts their families, makes them dependent on society and costs taxpayers money.” The Legislature agreed and passed SB 1913. The bill makes statutory changes to improve the assessment and collection of criminal court costs by requiring judges to inquire about a defendant’s ability to pay at the time of sentencing and expanding the tools judges can utilize if a defendant is unable to pay in full including installment plans, community service, and full or partial waiver of court costs. The bill also increases the minimum amount of credit for jail or community service from $50 to $100 per day and prohibits the posting of a monetary bail in a fine-only offense unless the defendant fails to appear and the judge finds that the defendant can post bail. Addressing Mental Health More than 20 percent of the inmate population in Texas needs mental health services.2 With that in mind, the Judicial Council made several legislative recommendations to improve the administration of justice for those affected by mental illness. SB 1326 amends the Texas Code of Criminal Procedure to improve screening and assessment times for individuals arrested that have a mental illness. It also streamlines the competency restoration process and authorizes counties to establish jail-based competency restoration programs. In addition, it requires OCA to develop best practices for judges in handling mental health cases. SB 292 creates a jail diversion grant program to reduce recidivism, arrest, and incarceration of individuals with mental illnesses. The program is financed with matching funds from the state and counties and encourages counties to implement community collaborative projects to improve mental health services. Strengthening Court Security On the night of November 6, 2015, Travis County District Judge Julie Kocurek was shot in her driveway shortly after returning home with her family from a football game. Judge Kocurek was hospitalized for several months, recovering from injuries from the attempted assassination before she returned to the bench. While this horrible event was not the first court security incident to occur in Texas, it reminded the judiciary of the importance of ensuring that judges and court personnel are protected. SB 42, the Judge Julie Kocurek Judicial and Courthouse Security Act of 2017, establishes a director of security and emergency preparedness at OCA, requires municipal judges and local administrative judges to establish court security committees, provides for additional training and certification of court security personnel, amends statutes to protect judges’ and their spouses’ personal information, and allows the Department of Public Safety to provide additional security for judges when necessary. Improving the Guardianship System During the 84th legislative session, lawmakers made several improvements to the guardianship system in our state and the 85th Legislature continued to build on that work. With the senior population in Texas expected to more than double by 2050,3 the Judicial Council made recommendations to protect some of our most vulnerable citizens. SB 1096 creates a statewide guardianship registry that will be accessible to law enforcement. If a person under guardianship is arrested, their guardian will be notified more efficiently. The law also requires all guardians other than attorneys, corporate fiduciaries, and certified guardians, to receive training, undergo a criminal history background check, and register with the Judicial Branch Certification Commission, or JBCC. SB 36 expands JBCC’s authority to regulate guardianship programs and requires it to compile a list of registered programs available on its website. Timothy Cole Exoneration Review Commission Recommendations HB 34 contains the recommendations from the Timothy Cole Exoneration Review Commission and puts in place several reforms to prevent wrongful convictions. Specifically, it amends the Code of Criminal Procedure to require interrogations to be electronically recorded in certain felony cases, places regulations on the use and tracking of jailhouse informant testimony, and requires the Texas Commission on Law Enforcement to develop procedures and training associated with eyewitness identification. Oaths of Office SB 1329 requires all oaths of office and anti-bribery statements for state officials appointed by the Texas Supreme Court, Court of Criminal Appeals, or State Bar of Texas, as well as associate judges appointed for the Children’s Courts be filed with the secretary of state. New Courts and Administrative Regions SB 1329 also forms six new district courts—453rd, 458th, 459th, 460th, 462nd, and the 464th—and three county courts at law—No. 6 in Fort Bend County, County Court at Law of Grimes County, and No. 3 in Hays County with varying creation dates. SB 1893, effective immediately, increases the number of administrative judicial regions in the state from nine to 11 to assist the presiding judges with increased workloads. Supreme Court Jurisdiction HB 1761 clarifies the jurisdiction of the Texas Supreme Court allowing the court to review an appealable order or judgement that presents a question of law important to the jurisdiction of the state, unless the decision of the court of appeals is made final by statute. Fewer Collection Programs HB 3167, effective immediately, increases the population threshold for counties required to have a local collection improvement program from 50,000 to 100,000. This change reduces the number of mandatory collection improvement programs across the state. Court of Criminal Appeals Recordings HB 214 requires the Supreme Court and the Court of Criminal Appeals to make a video recording of each oral argument and public meeting and to post the recordings on the court’s website. It is only required, though, if the Legislature appropriates money specifically for this purpose. The State Bar of Texas currently broadcasts and archives oral arguments and meetings for the Supreme Court on the TexasBarCLE website at texasbarcle.com/CLE/TSC.asp. Judicial Compensation How to appropriately compensate judges is a topic that lawmakers discuss, but don’t resolve, nearly every legislative session. Advocates argue that in order to maintain a strong and independent judiciary, and to attract qualified candidates and retain experienced judges, appropriate judicial compensation is essential. SCR 57 creates an interim committee to study funding judicial salaries through a formula using the “salaries of the highest appellate courts of the nine most populous states other than Texas, the salaries of judges on the U.S. Courts of Appeals, and the average starting base salaries of first-year associate attorneys at the five largest law firms in Texas.” Self Help Resources SB 1911 requires OCA, with assistance from the Texas Access to Justice Commission, to designate a self-help website with information regarding lawyer referral services, references or links to legal aid offices, legal self-help centers, and the Texas State Law Library. Clerks are also required to post this information on their court websites and in their offices. Specialty Court for Public Safety Employees HB 3391 allows for the creation of a specialty court, similar to a veteran’s court, for public safety employees such as peace officers, detention officers, and firefighters who have been charged with a criminal offense due to job-related post-traumatic stress disorder or other work-related mental health issues. NOTES 1) This figure includes the contingency riders, excludes employee benefits, and includes interagency contract funding. This funding level is an additional $17.3 million or 2.5 percent higher than baseline budgets for 2016-2017. CCR SB1 provides a total of 1,476.9 FTEs, a slight drop from the 2016-2017 levels. 2) Texas Behavioral Health Landscape at 3 (December 2014) (Madows Mental Health Policy Institute). 3) Population Projections for the State of Texas by Age Group for 2010-2050, Texas State Data Center. THE 85TH SESSION CONTRIBUTORS BEN ADERHOLT practices commercial and construction law in Houston at Coats Rose. BRUCE P. BOWER is deputy director of the Texas Legal Services Center. Bower has been a member of the State Bar of Texas since 1989. In 2012, Bower received the James B. Sales Boots on the Ground Award for service to Texas veterans. RICHARD A. CROW is a partner in the Houston office of Strasburger & Price. He is chair of the Real Estate Legislative Affairs Committee of the Real Estate, Probate and Trust Law Section of the State Bar of Texas and is certified in commercial real estate law by the Texas Board of Legal Specialization. DANIEL KRUGER is an attorney and mediator in San Antonio. He is licensed to practice law in Texas and the District of Columbia. MEGAN LAVOIE is the director of public affairs and special counsel to the Office of Court Administration. She previously served as general counsel and communications director for state Sen. Robert Duncan and as senior director of advocacy for the National Multiple Sclerosis Society. LaVoie is a graduate of Texas Tech University and St. Mary’s University School of Law. WILLIAM D. PARGAMAN is a partner in the Austin firm of Saunders, Norval, Pargaman & Atkins, is certified in estate planning and probate law by the Texas Board of Legal Specialization, and is a fellow in the American College of Trust and Estate Counsel. He was chair of the State Bar REPTL Section’s Estate and Trust Legislative Committee for the 2009-2013 legislative sessions and served as the section’s 2015-2016 chair. ROSS O. PEAVEY is a partner in the Austin firm of Brady & Peavey. He serves as vice chair of the State Bar of Texas Legislative and Campaign Law Section and is an editor of Texas Senate Practice. Working in the Texas Legislature and politics for more than 15 years, Peavey represents businesses, nonprofits, and other entities as an attorney and lobbyist. ALLEN D. PLACE JR. has been practicing law for 38 years. He is a former member of the Texas Legislature and was House author of the Texas Penal Code. For the past 10 sessions, he has represented the Texas Criminal Defense Lawyers Association at the Capitol. SHEA PLACE is a 2015 graduate of Baylor Law School where she was a member of the Baylor Law Review. Shea is an attorney for Place Law Office in Austin and represented the Texas Criminal Defense Lawyers Association at the Capitol in 2017. ROYCE POINSETT is a government relations attorney and registered lobbyist in the Austin office of Gardere Wynne Sewell. He previously served as an adviser to former Texas Gov. Rick Perry and House Speaker Tom Craddick, and he now represents businesses and associations at the Texas Capitol. DARYL B. ROBERTSON is a partner in the Dallas office of Hunton & Williams. DAVID SLAYTON is the administrative director of the Office of Court Administration and the executive director of the Texas Judicial Council. He is a graduate of Texas Tech University and Troy University, a fellow of the Institute for Court Management, co-chair of the National Court Joint Technology Committee, and a past president of the National Association for Court Management. RICHARD L. SPENCER is a partner in the Houston law firm Zeidman, Spencer, Beverly & Holt. He is a past chair of the Real Estate, Probate and Trust Law Section of the State Bar of Texas, a fellow of the American College of Real Estate Lawyers, and certified in commercial and residential real estate law by the Texas Board of Legal Specialization. BRIAN L. WEBB and BRANT M. WEBB, of the Webb Family Law Firm in Dallas, focus their practice exclusively on family law matters such as divorce, child support, and child custody and visitation.
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